NRGY MLP tanking with 8% plus yield
NRGY MLP tanking with 8% plus yield
Apparently down due to Citi negative downgrade....any comments??
Re: NRGY MLP tanking with 8% plus yield
Citi had negative comments on the propane business. One of our members has access to Citi research. I asked him to send me a copy of their report and I will comment when I get it.
NRGY is a big company with revenues locked in by long-term supply contacts. Hang tough, the dividends should be safe.
You can see how it stacks up to the other midstream MLPs by looking at our MLP Watch List.
NRGY is a big company with revenues locked in by long-term supply contacts. Hang tough, the dividends should be safe.
You can see how it stacks up to the other midstream MLPs by looking at our MLP Watch List.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: NRGY MLP tanking with 8% plus yield
I have obtained a copy of the 41 page report from Citigroup Global Markets which recommended selling NRGY.
Their view is based on an opinion that the retail propane business is under pressure, that profit margins and volumes are heading lower.
"Propane prices have continued to escalate with the
price of crude oil, while natural gas and electricity prices have remained stable. This
dynamic has made customer switching more economically feasible, which we believe will
limit margin expansion from current levels and possibly accelerate volume declines."
This past winter heating season
operator volumes fell by an average of 4.6% despite temperatures that were slightly
colder YoY and 5.3% colder than normal. Therefore, we believe that a return to normal
temperatures could have an even more dramatic impact on volumes and cash flows.
We estimate that operator volumes could decline by another 5.5% assuming normal
temperatures for the upcoming heating season.
We are decreasing our estimates for our propane related MLPs by various degrees
based on expected retail propane volume and margin growth. We are decreasing
our average propane volume growth rate for FY:11 and FY:12 by 2 percentage
points to (2%) YoY (previously 0%). We are also decreasing our average margin
growth rate for the same time period by 2.5 percentage points to (1%) YoY
(previously +1.5%). For FY:13 and onward we are expecting 0% growth in both
volume and margin growth. These new expectations have led us to expect on
average flat distributions (0% growth) going forward in order to maintain distribution
coverage ratios at or near 1.0x, where possible.
Send me an e-mail if you want the full report: dmsteffens@comcast.net
Their view is based on an opinion that the retail propane business is under pressure, that profit margins and volumes are heading lower.
"Propane prices have continued to escalate with the
price of crude oil, while natural gas and electricity prices have remained stable. This
dynamic has made customer switching more economically feasible, which we believe will
limit margin expansion from current levels and possibly accelerate volume declines."
This past winter heating season
operator volumes fell by an average of 4.6% despite temperatures that were slightly
colder YoY and 5.3% colder than normal. Therefore, we believe that a return to normal
temperatures could have an even more dramatic impact on volumes and cash flows.
We estimate that operator volumes could decline by another 5.5% assuming normal
temperatures for the upcoming heating season.
We are decreasing our estimates for our propane related MLPs by various degrees
based on expected retail propane volume and margin growth. We are decreasing
our average propane volume growth rate for FY:11 and FY:12 by 2 percentage
points to (2%) YoY (previously 0%). We are also decreasing our average margin
growth rate for the same time period by 2.5 percentage points to (1%) YoY
(previously +1.5%). For FY:13 and onward we are expecting 0% growth in both
volume and margin growth. These new expectations have led us to expect on
average flat distributions (0% growth) going forward in order to maintain distribution
coverage ratios at or near 1.0x, where possible.
Send me an e-mail if you want the full report: dmsteffens@comcast.net
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: NRGY MLP tanking with 8% plus yield
I just told Matt to add NRGY to our MLP Watch List which will be up on the website on Monday.
Matt Denegre is our intern from the SMU MBA program. He does an excellent job of updating the MLP Watch List each weekend and preparing company profiles for companies on our Watch List. We now have two interns from the Rice University MBA program. They are updating profiles on the Sweet 16.
Our plan is to generate a lot of company profiles after 2nd quarter results come out and before school starts in late August.
Matt Denegre is our intern from the SMU MBA program. He does an excellent job of updating the MLP Watch List each weekend and preparing company profiles for companies on our Watch List. We now have two interns from the Rice University MBA program. They are updating profiles on the Sweet 16.
Our plan is to generate a lot of company profiles after 2nd quarter results come out and before school starts in late August.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group